Expect Indian market to return about 12-15% in 2026: Mark Mobius

India remains a key market for emerging markets veteran Mark Mobius, with about 30% of his portfolio allocated to country. In an interview with Himadri Buch, Mobius, once dubbed as ‘The Indiana Jones of Emerging Market Investing’, shared his views on India-China, US Fed rate movement, and gold, among other topics. Edited excerpts:

How is your portfolio allocation looking as the focus shifts to the new year? How do you view holding cash?

The outlook looks quite uncertain, particularly because uncertainty in the US is pronounced. I’ve been advising people not to go out of the market, but at the same time to be cautious and be ready with cash in hand. I would say the emphasis has got to be on capital preservation. People should keep maybe 20% in cash or got to keep some cash in reserve, because the market is quite uncertain. We have about 20% cash. I’ve put a lot of hedges on my purchases. I’ve used put options to protect myself on the downside.

Do you see India performing better in 2026?I think India will do very well in 2026. Prime Minister (Narendra) Modi is now making moves to reform the economy and the government. One of the big barriers India faces is the difficulty for investments to come in, and the degree to which it’s able to work on that will be very good for the economy.

Between India and China, which market would you prefer?

India will probably outperform for a number of reasons. The dynamics of the Indian market is favourable, not only because of reforms, but also because more international players are sourcing more from India. There have been a lot of problems between China and America, so there’s caution around China. That said, China cannot be ignored. Both markets are important, but India’s potential for growth is greater. You can see it in the numbers that the growth in India is much greater. The population, the sourcing shift away from China to India, it all adds up.So, what kind of returns do you expect from India in 2026? Probably low double-digit returns around 12-15%. People will be more cautious, and much depends on what happens in the US. The US economy is huge and affects everyone. The dollar hasn’t been strong either. How are you placing your bets on India? We’re focused on companies that use technology, not necessarily creating technology, but using it to a great extent. About 30% of portfolio is in India, and the rest is in other EMs. We’re buying US stocks that have exposure to EMs. US companies are very active in emerging markets, and the US market is very liquid.

Where do you see value in India? It’s about companies that use technology effectively. Retail is important in India. Online shopping, delivery systems, and technology adoption are transforming retail. That’s very exciting. Manufacturing is another area. I’m bullish on India becoming a major supplier of computer hardware. Apple sourcing from India is just the beginning. Another overlooked factor is chip software development. A lot of chip coding is already being done in India by international firms. Over time, India could develop its own chip industry. There’s no reason it shouldn’t.

Have you been participating in India’s buzzing IPO market? No. We usually stay away. If someone is selling, you have to ask why. Some IPOs run up quickly, but it can be a hazardous journey. I tend not to get involved.

How do you view gold and silver at current levels? Gold will probably maintain these levels but not go much higher. It had a big run. I’m holding gold because key factor is money supply. During Covid, money supply surged 20-30%, driving gold higher. It’s closer to 10%, so I don’t expect much upside, but gold is worth holding.

Coming to the US, what’s your view on the AI sector? Has the rally gone too far? Yes, it’s gone a bit too far. A lot of people are piling in without thinking, similar to past tech booms. AI is incredible and here to stay I use it almost every day, but valuations have probably been overdone. We need to be careful there.

How do you see the US Federal Reserve’s policy trajectory next year, especially with a new chairperson set to take charge? Fed will loosen policy and lower rates. That’s going to happen. That doesn’t mean the stock market will boom, but the Fed will definitely become more accommodative.

How many rate cuts are you expecting in 2026? Probably two cuts of 25 basis points each. It could be as much as 50 basis points, depending on how the market performs. Trump will push for bigger cuts, but he’s limited by Congress and the courts. There’s a limit to what he can do.

What’s your outlook on the US dollar and bond yields? The dollar will probably stay where it is, not much weaker, but not strong either. Bond yields will come down as rates fall, which will benefit holders of higherinterest bonds.